You are not unique if you live in a community governed either by a Homeowner Association (HOA) or Condominium Association (COA). Luxury high-rise condominiums grace the skylines of our coasts, and the well manicured lawns of gated golf communities seem to be everywhere.
The fact is practically every home and condominium in South Florida is governed by either a Homeowner Association (Florida Law Chapter 720) or Condominium Association (Florida Law Chapter 718). There are a number of significant differences between the two chapters, primarily dealing with the fact that condominiums have common elements in addition to common property. For example, if you live in a condominium, the walls, floors, ceilings and that balcony you have is shared with your neighbor. The hallway outside your front door is owned in part by you and everyone else in your building along with the lobby and elevator (if they exist) and the complete exterior of the building itself. Each unit owner has a partial interest in that entire complex in addition to the actual space they call their condominium. Furthermore, that condominium building sits on a piece of land which is also shared with every owner along with the parking spaces and other property such as pools and clubhouses. In contrast, the members of communities with single family homes or town-homes do not have a shared or common interest in another member’s home or structure.
To the extent that most of our communities are governed by one type of association or the other, most of us think very little about the powers these associations have over us. We pay a monthly fee to cover common area maintenance, reserves and the cost for security and landscape services. We usually are content with the service we get for our monthly fees. Some of us may participate in monthly meetings, or get involved on the board as an elected or volunteer member. But all is not rosy on the Homeowner Association or Condominium Association fronts. The boards of these associations wield a lot of power and as you know, too much power concentrated in any one place may corrupt the boundaries of common sense.
Realtors deal with associations all the time. When we sell a home or a condominium, documents which include the bylaws, charter, amendments and minutes of the association need to be transferred from the current to the new owner. These documents set forth the restrictions which the members have voluntarily agreed to as a condition of ownership. It is highly recommended that you read these documents before you conclude your purchase. When you purchase a home or condominium you have a right to see all of these documents and to get all of the updates prior to close. You also have a right to review the budget and reserves of the association. An important consideration of living in an association is to know that the association manages its funds and expenses wisely.
In addition to facilitating the passing of the association documents, Realtors assist the buyer with the required member approval process. This process used for prospective residents or tenants has up until recently been largely ceremonial. Usually all that was involved was completing an application stating the names and phone numbers of the new resident or prospective tenant. The board would then use that information for the purpose of registering association voting rights and other mundane but important things such as issuing gate access passes, keys for common areas, and to ensure that every new resident is familiar with the rules and regulations of the community. However, boards are now using this approval process for a lot more. They are using this process as a means to deny ownership or tenancy in their communities.
Lured into finding ways to manage losses caused by the massive foreclosure crisis, association boards have fixed in their sites that they can deny membership to their communities on the basis of financial ability. Many associations are requiring credit and background checks, financial statements and other proof that new owners or tenants have the financial ability to live in their communities. There are some people to be sure who think requiring personal financial information of their neighbors is a sound way to insure that the association can collect the money it needs to pay their expenses. On the other hand, there are probably a lot more people who think this kind of action is unwarranted, unnecessarily intrusive and perhaps even illegal and discriminatory.
Imagine for a moment that you want to sell your home. Your home is worth $250,000 and in a nice community with some basic amenities such as a pool and clubhouse. The monthly association fees are around $200 per month. As a property owner, why should the sale of your property to an otherwise qualified buyer who has sufficient funds to purchase your home with cash or by obtaining a mortgage be contingent on an association board’s right of veto? How can you be certain that the process used by the board is consistently applied and reviewed without prejudice or bias? Should the board of directors have the right, for example, to negate the sale or rental of property to a prospective buyer or tenant simply because their credit score is below 600? Some associations are doing that right now to prospective buyers and tenants.
In another scenario, should a Homeowner association or Condominium Association have the right to limit an owner’s right to rent their property? Many communities are doing just that by imposing strict credit score limitations, or time limitations on how soon a property can be rented after changing ownership. The applications for tenants vary from community to community and sometimes border on the edge of insanity. One local community in West Palm Beach actually requires owners to obtain a city business license before the property can be rented. In fact the application to rent or purchase in this community is not only convoluted, but almost one could say, deliberately thick and confusing.
Another area of abuse has to do with the Section 8 public housing program. Too many associations ban residents from renting to section 8 clients. There are a number of communities that have an outright ban on section 8 tenants. But if an outright policy against section 8 isn’t stated, the credit score requirement, if set high enough, usually does the trick. Discrimination in any form, be it financial or otherwise is just plain wrong and has no place in the housing market.
In absence of any particular code or section clarifying the extent that association boards can go in their resident approval processes, the practice of financial screening will probably continue until the situation gets out of hand. And, it will get out of hand sooner or later until someone starts considering the questions of how far associations should be allowed to go in approving residents. Is a credit score requirement acceptable? If so, how is it evaluated and by whom? Who has access to the credit report, and how long and where is it to be retained by the association? What information can an association legitimately require or ask of a prospective resident or tenant? Should there be a minimum and maximum time period required for the approval process, and should there be a uniform appeals process in the event of a denial? Who sits on the committee to approve membership? What penalties should be imposed against a Homeowner association or Condominium Association that violates these procedures and how would disputes be adjudicated?
There are indeed many questions that need to be asked and considered about the approval process, and of course passionate debate on all sides of the issue is to be expected. But a thorough evaluation and perhaps standardization or better regulation to the process is needed to insure that the many advantages and the quality of life associated with community development living continues into the foreseeable future.
I’m interested in your comments, questions, or suggestions. Please write me at Stephen.snow@century21.com!
